Exam 10: Consumer Choice and Behavioral Economics

The order of the letters along the rows of computer keyboards could be changed to allow users to type faster,but this would inconvenience the vast majority of people who learned to type with the current keyboard layout.The costs of switching to a new layout make this change unlikely.This is an example of

Behavioral economics helps explain why customers ________ at J.C.Penney.

The economic model of consumer behavior predicts that

Marginal utility is the

The demand curve for an inferior good can never be downward sloping.

For a demand curve to be upward sloping,the good would have to be an inferior good,and

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other,similar products.These economists believe that

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

Professor Parallax chooses two students in his economics class,Jasmine and Cassandra,to participate in the ultimatum game.He chooses Jasmine to be the allocator and Cassandra to be the recipient.He gives Jasmine $50 and as the allocator,she gets to decide how to split the money with Cassandra.If Cassandra decides to accept the amount allocated to her by Jasmine,both students get to keep the money.If Cassandra decides to reject her allocation,neither student gets to keep the money.How much will each student end up with if each student acts as if fairness is important? How much will each student end up with if only Cassandra acts as if fairness is important? How much will each student end up with if neither student cares about fairness?

Manuri has $300 to spend on Pilates classes and Yoga classes.The price of a group Pilates class is $20 and the price of a group Yoga class is $10.Manuri's optimal bundle is given by "A" in Figure 10-7. -Refer to Figure 10-7.Suppose the price of Pilates sessions rise to $30 while income and the price of Yoga sessions remain unchanged.The income effect of this price change is represented by the movement from

Figure 10-9 -Refer to Figure 10-9.The change in the budget constraint from BC1 to BC2 implies

What is the marginal rate of substitution?

Marginal utility is

What must be true in terms of the income effect,the substitution effect,and the type of good for the good's demand curve to be upward sloping?

Which of the following is not a characteristic of indifference curves?

Arnold Kim began blogging about Apple products during his fourth year of medical school.Kim's Website,MacRumors.com,became so successful that he decided to give up his medical career and work full time on his Website,despite the nearly $200,000 he had invested in his education.In making his decision,the $200,000 he spent on his education

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

A change in the price of a good has two effects on the quantity consumed.What are these effects?

A construction project in Congressman Foghorn's district is unfinished.Foghorn has asked that a new appropriations bill include funds to complete the project,despite a report by an independent agency that the project is a waste of taxpayer money.Foghorn's project is a bridge that crosses a river between two cities in his district.The press has criticized Foghorn and dubbed the project "a bridge too far" since another bridge,located closer to the same two cities Foghorn's bridge will connect,already exists and can accommodate all traffic between the two cities.Foghorn argues that if the bridge project is not completed,the $50 million already spent will have been wasted.Is Foghorn's argument economically rational? Explain your answer.

The quantity of tickets demanded to the Super Bowl is always greater than the quantity supplied.Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?